Euro zone manufacturers recorded their fastest expansion in more than four years during August, according to the latest Purchasing Managers’ Index (PMI) released by S&P Global. The composite PMI rose to 52.7, up from 51.9 in July, marking the highest reading since May 2022.

New orders and export demand drive growth

New orders climbed at the sharpest pace since early 2022, buoyed by a rebound in export demand that lifted for only the second time in four‑and‑a‑half years. Export orders were especially strong in Austria, Germany and the Netherlands, providing a notable boost to the overall order book.

Factory output accelerates

Factory output grew faster, with the output sub‑index reaching 53.3, a 54‑month high. Production gains were led by intermediate goods such as chemicals, metals and electronic components. Germany posted its strongest factory growth in over four years, while France also contributed positively. Italy, however, slipped into contraction for the first time since January, and Spain remained in negative territory.

Employment and price trends

Employment was broadly unchanged, ending a three‑year streak of monthly declines. Input‑cost inflation eased to a six‑month low, though it stayed well above pre‑conflict levels. Output‑price inflation followed a similar pattern, keeping pressure on euro‑zone monetary policymakers.

Implications for monetary policy

Analysts note that the softer producer‑price growth may ease broader inflation concerns, but the pace of disinflation appears to be leveling off. The European Central Bank is expected to raise interest rates again this month as high energy prices keep inflation above its 2% target, and to hold policy steady through at least mid‑2027, according to a Reuters poll.

Official data released on Tuesday are projected to show inflation rising to 3.3% in August from 2.9% in July, underscoring the challenges facing policymakers.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.